Different owners within a retail park in Romania: practical aspects

Real Estate Gazette 27 Romania

Shopping centers, including retail parks, are viewed in Romania today as commercial and entertainment hubs, where shops operate together in an integrated way to offer consumers an enhanced shopping experience. Whilst this integrated feel may be fairly simple to achieve when the retail park is owned by a sole owner, who can implement uniform treatment across all tenants in terms of business activity, opening and closing times, configuration of stores, etc, achieving the same outcome when a retail park is owned by two different owners may prove more challenging.

Retail parks are usually designed to work as one block, including the internal roads and parking areas. The decision to sell part of the retail park to another party, such as an anchor tenant, will mean that the retail park is operated by two different owners. Such a decision should be taken only after careful consideration of two aspects which could impact on the future operation of the retail park, namely: (i) management of the retail park and (ii) operation of common areas.

Management of the retail park

In order to ensure the integrated operation and management of the retail park, as well as regulating any other aspects arising out of the relationship between the two owners (including the granting of any other rights of use or imposing restrictions/specific covenants), the two owners should consider entering into a neighbouring agreement establishing guidelines for problem-free “cohabitation” in the retail park.

Such an agreement will usually regulate the overall activity in the retail park (for example, shopping hours, delivery conditions, etc); the management and operation of the common areas used within the retail park (such as access roads and car parks); and the payment of service charges incurred in relation to these common parts or the conditions under which construction or repair works may be undertaken.

The neighbouring agreement can also regulate the marketing activities and the day-to-day administration of the retail park. One of the owners may take responsibility for the administration of the retail park or both owners may decide to appoint a professional management company.

The neighbouring agreement can also lay down certain personal rights for the owners such as the terms and conditions applicable to the right to access and use of the car park owned by the other owner. Restrictions should be included with regards to the usage right, such as those preventing the blocking, hindering, limiting or affecting in any way the use of the car park.

The parties can also impose conditions with regards to maintenance, repair or reconstruction works on the car park (for example, to perform such works only outside the operating hours of the other owner, to send a prior written notice with regards to such works or to not affect or make unavailable more than a certain percentage of the car park through such works).

The parties can also agree to include taxes on the land on which the new owner’s car park is located in the service charges payments. The observance of this obligation to pay the service charges or of other duties under the neighbouring agreement can be secured by a guarantee which can be provided either as a cash deposit or as a bank letter of guarantee.

Nevertheless, the unitary management of the retail park can be limited in time. Thus, the neighbours can agree that after a certain time period lapses, the management and operation of the retail park can be split between the owners. In this case, the neighbours will have to put in place practical measures to ensure the effectiveness of the separate management and operation, such as installing separate meters and connections for the lights used in each of the properties and/or on the common parts, such as the access roads.

In order to preserve the commercial concept of the retail park the parties to the neighbouring agreement can impose certain limitations on the permitted use of the neighbouring properties (for example, to use the car park only for purposes of parking small vehicles or trucks used by visitors or clients, to observe the use of a specific building (for example, DIY/hypermarket store, etc). However, such restrictions should usually be limited in time due to potential breaches of competition legislation.

Obligations generated for each of the owners by their activity in the retail park have to be mirrored in the neighbouring agreement for the other owner as well. The neighbouring agreement (or at least specific rights provided therein) should be recorded in the land register in order to make them enforceable against third parties (for example, subsequent owners).

Operation of common areas

Access and parking are essential for conducting activity in a retail park. Commercially, such spaces become common areas for the use of both owners, their tenants and customers. Legally, specific scenarios must be put in place for the operation of the common areas. To identify the best approach, the following scenarios are worth exploring:

  1. Each of the owners to hold an abstract quota of the ownership right over the common areas and reciprocal servitude rights over the other’s quota. In this scenario, each of the owners will be entitled to use the entire common areas (whilst observing the permitted use) and to freely dispose of its own quota. Although no disposal may be made without the other owner’s consent, the disadvantage is that either owner can request the split of the car park at any time.
  2. The new owner has exclusive ownership, whilst the initial owner has a servitude right over the common areas (both for the use of the common areas and for prohibition to build on or alter the common areas). The servitude is a right in rem, meaning that it will be registered in the land registry, it remains attached to the common areas (irrespective of the subsequent owners or successors), it is enforceable against third parties and is not limited in time. In this scenario, the initial owner will be able to use and access the common areas directly and immediately without any third party cooperation and will also be able to ground a potential claim (or injunction) directly on the servitude right. However, the new owner could hinder the use of the common areas by the initial owner (for example, by instituting barriers for access in the car park).
  3. The new owner has exclusive ownership, whilst the initial owner has a usufruct right (non-exclusive use) over the common areas and servitude rights (both for the use of the common areas and for prohibition to alter the common areas) after the expiry/termination of the usufruct. Similar to the servitude, the usufruct right is also a right in rem. However, the usufruct is limited in time to a maximum of 30 years and can be unilaterally terminated by the new owner if the initial owner abusively uses/damages/deteriorates the common areas. In this scenario, the initial owner will be able to use and access the common areas directly and immediately without any third party cooperation and will also be able to ground a potential claim (or injunction) directly on the basis of the servitude right. The initial owner will also be entitled to conclude various acts in relation to the common areas.

Another important aspect to be considered is the access of the new owner’s shopping unit to public roads. In order to ensure such access, the new owner will usually seek to obtain a servitude of way right over the internal access roads owned by the initial owner for access and passing, and a negative servitude prohibiting building over the inner access roads.

The servitude and/or usufruct rights can be implemented either through the neighbouring agreement or through separate specific deeds. Given that these are rights in rem over real estate assets, which are registered in the land registry, the neighbouring agreement and/or the separate specific deeds need to be concluded in the form of a notarized deed.

The proper creation and implementation of the various arrangements between the owners of a retail park is a key element for the operation of a retail park. That is why all such aspects have to be thoroughly considered. Here, as in so many cases, “prevention is better than cure”.